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Consider investments A and B, which have distributions of rates of return as follows : A Probability rate of return 0.05 -5 0.1 0 0.35 5 0.
Consider investments A and B, which have distributions of rates of return as follows :
A
Probability rate of return
0.05 -5
0.1 0
0.35 5
0.35 10
0.1 15
.05 20
B
probability rate of return
0.02 -10
0.03 -5
0.05 0
0.60 10
0.20 15
0.10 20
a. If an investor defines failure as suffering a loss of more than 5%,determine the risk of failure of each asset.
b.. If an investor defines failure as earning less than a zero rate of return, which is riskier? Explain?